Applying for 501(c)(3) Tax-Exempt Status
Applying for 501(c)(3) Tax-Exempt Status - NAMI-NC
Applying for 501(c)(3) Tax-Exempt Status - NAMI-NC
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Why apply<br />
<strong>for</strong> <strong>501</strong>(c)(3) status?<br />
The benefits of having <strong>501</strong>(c)(3) status include<br />
exemption from federal income tax and eligibility<br />
to receive tax-deductible charitable contributions. To<br />
qualify <strong>for</strong> these benefits, most organizations must<br />
file an application with, and be recognized by, the<br />
IRS as described in this publication. Another benefit<br />
is that some organizations may be exempt from<br />
certain employment taxes.<br />
Individual and corporate donors are more likely to<br />
support organizations with <strong>501</strong>(c)(3) status because<br />
their donations can be tax deductible. Recognition of<br />
exemption under section <strong>501</strong>(c)(3) of the IRC assures<br />
foundations and other grant-making institutions that<br />
they are issuing grants or sponsorships to permitted<br />
beneficiaries.<br />
An IRS determination of <strong>501</strong>(c)(3) status is recognized<br />
and accepted <strong>for</strong> other purposes. For example: state<br />
officials may grant exemption from state income,<br />
sales, and property taxes; and the U.S. Postal Service<br />
offers reduced postal rates to certain organizations.<br />
Who is eligible<br />
<strong>for</strong> <strong>501</strong>(c)(3) status?<br />
There are three key components <strong>for</strong> an organization<br />
to be exempt from federal income tax under section<br />
<strong>501</strong>(c)(3) of the IRC. A not-<strong>for</strong>-profit (i.e., nonprofit)<br />
organization must be organized and operated exclusively<br />
<strong>for</strong> one or more exempt purposes.<br />
organized—A <strong>501</strong>(c)(3) organization must be<br />
organized as a corporation, trust, or unincorporated<br />
association. An organization’s organizing documents